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Politics : Stockman Scott's Political Debate Porch -- Ignore unavailable to you. Want to Upgrade?

To: stockman_scott who wrote (4288)	8/10/2002 10:57:26 AM
From: Jim Willie CB	Read Replies (1) \| Respond to of 89467

currency turmoil is killing Brzail, debts just rose 150% overlooked factor in Brazil is currency effect on debt since beginning of year, the Real has dropped 60% that means local values are now 2/5 of what they were that means dollar denominated debt is now 5/2 of what it was so Brazil debts rose 150% !!!!! (for math challenged, 5/2 is 3/2 more than one) this IMF $30B is nothing but a bucket of water on a bonfire nothing but a 3-6 month reprieve nothing but an opportunity for Americans to walk away after saying "we helped" I find the Argentina contrast very interesting Arg bankers were stubborn in keeping their Peso constant they pegged it constant to the dollar for years, stupidly well at first, it thwarted hyper-inflation but later, it encouraged gutting the economy, as with USA's so their economy went to shit, uncompetitive making their constant debt level unpayable (they are a fishbowl example of US troubles upcoming) but Brazil allowed their Real to devalue their economy has not gone to shit, as a result but their debt has skyrocketed to a level unpayable screwed on the left, or screwed on the right, but surely screwed this is how the entire South American continent will default and absolute chaos will reign supreme imagine your home mortgage of $120k just went to $300k I could not swallow that economy or no economy, jobs or no jobs that cannot continue to float the currency turmoil is only beginning worldwide Asian bank troubles will be front & center in a few months JPMorgan and Citi are like two floating crippled ships about to be attacked by pirates under six flags Citi just saw a class action lawsuit for Enron nondisclosure get your front row seat / jim

To: stockman_scott who wrote (4288)	8/10/2002 12:48:20 PM
From: Jim Willie CB	Read Replies (1) \| Respond to of 89467

Real estate could be the next bubble By Andrew Cassel, Philadelphia Inquirer Columnist Posted on Fri, Aug. 09, 2002 Hardly anybody, it appears, chuckled at my tongue-in-cheek discussion of stocks vs. houses as investments the other day. So it goes. Economics is hard, but humor is harder. Several readers, though, said they would appreciate a serious look at the topic. So, with tongue removed from cheek, let's try it again: Spooked by the stock market's 21/2-year descent, lots of people are shifting money from equities into real estate. House prices continued to rise right through the recession; nationwide, they are more than 8 percent higher this year than in 2001. This may reflect a rational search for stability - shelter, both literal and figurative, for the retirement nest egg. Or it could mean panicky investors are running from the last bubble to the next one. Probably there's some of both going on. As more than one smart person observed during the '90s boom, you never know for sure it's a bubble until after it's popped. Could real estate be the next big blowout? There are arguments for and against. One of the biggest worries is simply how fast prices have risen - outpacing not only inflation, but also the growth of household income. That means people are digging deeper to pay for houses, either taking on bigger mortgages or drawing from savings more than in past years. Nothing wrong with that, except it's unlikely to keep happening forever. If incomes don't keep pace, eventually prices have to adjust. Simple supply and demand Demographics, on the other hand, seem to be pushing up demand for housing. Baby boomers are in their 40s and 50s, the prime years for owning real estate. As a result, the percentage of homeowning households in the United States leaped in the '90s from around 64 percent to a record 69 percent. While demand grows, moreover, supply is constrained - by restrictive zoning laws, environmental limits and antigrowth "Nimbyism" that makes it harder to build in many areas. In effect, promoting higher real estate prices has become official policy in many local communities. But probably the most powerful thrust pushing real estate sales is interest rates, now at 40-year lows. Mortgages not only cost less but are easier to get, thanks to improvements in the financial-services business. Backed by the giant government-sponsored corporations - Fannie Mae and Freddie Mac - home finance has become highly efficient, funneling trillions of investment dollars into housing. Government's endorsement Don't forget, too, that homeownership is heavily subsidized by the tax code. Mortgage interest payments and property taxes provide many families with their biggest tax deductions, and are a not-so-subtle encouragement to favor larger and more expensive homes. So whatever the economic case for picking real estate over stocks, it's undeniable that government - at all levels - prefers you to put your money there. But that's not a guarantee that your investment is safe, or that it will grow faster than in the stock market. It is undeniable that real estate prices are less volatile than those of common stocks. And some property investments clearly do appreciate handsomely over time, occasionally generating income along the way. But the same can be said of stocks. Even after Wall Street's recent slide, people who invested prudently through the 1990s can boast of decent - if less than spectacular - returns. Keep in mind, also, that most people don't invest in stocks by putting 10 percent down and borrowing the rest. A 10 percent drop in your stock portfolio can be unpleasant, but a 10 percent drop in home prices can wipe out your entire investment. It's not hard to imagine an eager buyer jumping into a hot real estate market and later discovering not only that she overpaid, but that she is trapped - unable to sell the property for as much as she borrowed to buy it. Such stories were fairly common in parts of California and Massachusetts 10 years ago, and it could happen again. Stocks vs. real estate? Ultimately the same rules apply: Buy at appropriate levels, understand your risks, and think long-term. -end-